7 Pros and Cons of Buying a Franchise

When you think about what you want to do next, you may be among the many who look into investing in a franchise. Even if you’ve built up experience in an industry where you can “hang your own shingle” or you have a novel idea you’d like to get off the ground, you may still want to put resources into something proven. Yes, there are upfront costs and other challenges, but there’s also the chance to get up and running with your own business quickly and efficiently.

Not all franchise opportunities are created equally and the pros and cons of each opportunity should be carefully evaluated. There are also some higher-level considerations that apply to most franchise opportunities. As with any important business decision, do your research up front and get the advice of experts — attorneys, accountants and others who have tread the path.

The upside to investing in franchises is clear cut:

-Franchises can be profitable.

-When you own a franchise, you have an asset you can sell.

-You can plug right into an established business model.

-Franchisors have done extensive research about prices, locations and layout.

-Marketing and advertising are often plug and play.

-Access to financing can often be arranged directly with the franchisor.

-You can be your own boss.

The potential downsides are not difficult to identify either:

-The upfront investment can be significant, as can net worth requirements.

-Whether or not you are able to hire extensively, you can expect to work hard.

-Especially for bigger franchises, nearly all aspects of the business have been mapped out and will be monitored.

-Innovation is not as valued as it might be elsewhere.

-Profits are not a sure thing.

-Not all franchisors prevent others from opening a competing branch near you, so you can find yourself with competition.

-There can be fees, royalties and some potentially tough consequences (like cancellation of your franchise agreement) if you miss payments.

There are plenty of resources devoted to assessing the opportunities. Here are a few:

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